Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
To provide shareholders with an attractive and growing level of income, together with the potential for capital growth, from investment in songs and associated musical intellectual property rights.
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Seems to be well supported at these levels. The new board members bought shares in November and the Chairman's honest appraisal of the issues feels like a breath of fresh air - plus the large investers (holding 60%) appear to be on board. A 10% revenue growth should also provide more options to those conducting the strategic review.
I'm surprised this hasn't fallen a lot further.
Best thing is for someone who knows what they're doing to take it over and sack the current board.
Unhooked, register for the call on 4th Jan, you may get your answer. It'll be entertaining. At the end of the day there's value in the assets, I'm just surprised they haven't sacked investment advisor yet given the failed continuation vote.
Have you ever read a Chairman's Statement that reads like this? How on earth did a listed company with supposedly £2.5bn in assets get itself into such a pickle?
"The newly constructed Board are aware of multiple valuation data points. The Board, made up entirely of non-executive directors, has sought advice from the Investment Adviser, as the Company's delegated executive function, for their opinion as to the fair value of the Company's assets.
Regrettably, the Investment Adviser initially refused to provide an opinion. While the Investment Adviser did eventually provide an opinion to the Board, it was heavily caveated. Whilst the Board sought for correspondence with the Investment Adviser on the matter to be published on the Company's website in order to provide transparency for shareholders, the Investment Adviser has refused to consent under the confidentiality clauses of the Investment Advisory Agreement.
We note the announcement from Hipgnosis Song Management stating that they will 'continue to work in a constructive manner to support the interests of the Company and its shareholders'. On behalf of the Board, I therefore urge the Investment Adviser to provide the Board with their opinion as to the fair value of the Company assets, without caveats, such that we can provide greater certainty and transparency to our shareholders."
Almost bought into these a year or so ago and now pleased that I did not.
Unflattering article
https://www.ft.com/content/e2550128-2d10-499d-a334-18116a7999ca
=== or ===
https://archive.ph/odtUl
So does this mean that SONG can back out of the $471 million sale to Hipgnosis Capital? And, if so, for what penalty?
Historically, you can't argue with actual cash trades in the market as being the most representative of an asset's current market value. Unless the valuer can provide a watertight reason for why a recent, uncompleted, sale is grossly misleading. So far, SONG isn't giving us that reason.
Also, is there anyone else here who is mighty confused by references to a whole bunch of companies containing the name 'Hipgnosis', but which are all under different ownerships and not beneficially owned by SONG? I find it very misleading.
Ooops. Another poster on ADVFN pointing out that manager's fees actually based on company valuation (SP).
I really should know which is correct as a shareholder. Apologies to anyone who feels misled by any of my posts (although you should be used to that if your a SONG shareholder).
Good point raised by a poster on ADVFN about manager's fees being based on NAV so, in a way, incentive for the Company to get NAV down whereas Manager has a different incentive.
Maybe Chris Mills already at work.
Might lead to to difficult discussions with bankers re covenants.
"The valuation the Company received from its independent valuer is materially higher than the valuation implied by proposed and recent transactions in the sector, in particular, the proposed sale of assets to Hipgnosis Songs Capital for net consideration of $417.5 million, reflecting a discount of 24.3% to the valuation of these assets as at 31 March 2023, and the recent sale of non-core assets of $23.1 million, reflecting a 14.2% discount to to the valuation of these assets as at 30 September 2023."
So, SONG try to sell off some assets to a mate at a big discount and then seem surprised when their independent valuer continues to value the catalogues at a higher figure. Time for Chris Mills to start banging a few heads together.
"The Board of Hipgnosis is pleased to announce the appointment of Christopher Mills as an Independent Non-Executive Director of the Company effective immediately."
Should be interesting to watch how things develop from here.
Here's hoping, 128pps would do nicely thnak-you.
The gross consideration reflects a 14.2% discount to the valuation of the Songs prepared by the Company's Portfolio Independent Valuer as at 30 September 2023
I wonder if that means we should think of the NAV overall being 14.2% lower than they say it is?
Oops. Accident prone. I do pick 'em!
This could get messy.
Service of Claim
Further to the disclosure in the 2023 Annual Report, on page 100, Hipgnosis Music Limited (in liquidation since March 2018) ("Hipgnosis Music Limited") has served proceedings against Mr Mercuriadis, the Investment Adviser and the Company in the English High Court. In summary, Hipgnosis Music Limited alleges a diversion of business opportunity from Hipgnosis Music Limited (of which Mr Mercuriadis was previously a director) to the Company and the Investment Adviser and also alleges that the Company unlawfully assisted Mr Mercuriadis with, or received, this alleged diversion. Mr Mercuriadis, the Investment Adviser and the Company deny such claims and intend to vigorously defend them. The Company is not insured as to the costs of dealing with this claim.
It's always good to see NEDs buying shares, I can't quite work out how good it is here. Maybe it's a case of 'shutting the barn door after the horse has bolted'.
Crazy really. Our catalogues have done so well that we're having to make some bonus payments that you didn't know about to the original owners. So well, in fact, that we can't afford to pay out any dividends.
Presumably had we not generated so much money then the dividend would have been safe.
The upside down way the world works according to MM.
So SONG has been a mistake. With no confidence in the management and who knows what further skeletons to appear and too many unknowns regarding the real value of the assets, I'll take my medicine and go elsewhere. I wonder if confidence in pseudo investment trusts will ever be repaired.
The Non-executive directors have just been given a big pay rise to a minimum of £82,500 on the very high side for a UK IT. How much scrutiny have they given to this? Surely they have access to the finer detail of these agreements?
In my opinion both the board and the management company are at fault here, my preference is for the trust to wind up. Hopefully the sale of the assets will be some time off when interest rates are a lot lower and the return will be somewhere between the current share price and the NAV.
And in the 2019 report:
“Contingent consideration
Under the terms of the acquisition agreements for Catalogues, contingent consideration may be payable dependent on future independent valuations of the Catalogues or revenue received within a specific time frame of acquiring the Catalogues. Contingent consideration will be recognised when performance conditions are met or the amount is a deferred liability. In such cases, a liability will be recognised alongside an associated finance charge which will be accrued over the respective deferral period.”
As far as I can tell there is no reference to this in the prospectus or accompanying documents.
So it appears that when some catalogues were bought there was an additional amount to the be paid in the future if the catalogue performed better than expected. It would be usual that the performance bonus would be less than the actual performance. Surely the idiots aren’t paying out a bonus that is higher than the actual performance increase? I think the board are duty bound to provide more information about the bonus arrangements.
In the above definitions there are comments about the expected level of future performance bonuses, basically saying there is nothing to worry about. This is what was said in the 2023 annual report:
“As a result of the strong performance of certain Catalogues, a Catalogue bonus provision was
recognised. This is based on actual and expected future Catalogue performance that is highly probable. Whilst these liabilities are recognised in the current year, the Company doesn’t anticipate that these liabilities will be incurred at a material level in future years.”
Compare this to yesterday’s RNS:
“It has been determined that the Catalogue bonus provision is expected to increase by approximately $23 million to $68 million at 30 September 2023 as there are now ten (31 March 2023: six) out of the Company's 146 Catalogues likely to meet performance hurdles as defined in their acquisition agreements.”
Given the completely incompetent assessment of these liabilities this is really worrying:
“In addition, there are a further nineteen Catalogues with active bonus provisions totalling $75 million, that are unlikely to meet performance hurdles; these are not recognised as provisions but are contingent liabilities and will be disclosed in the forthcoming interim results with associated sensitivity analysis.”
The problem is that there is not sufficient information in the pubic domain for shareholders to understand the implications of this. Going back to my main concern, is it possible that the bonus payments are higher than the actual out performance, which would be the only sensible reason to stop the dividend. If the forecasted revenue for the relevant catalogues was below the performance threshold then now that the catalogues have performed better than expected then revenues will be higher, not 10% lower.
As a holder of SONG shares I thought I would share the results of my research into the latest RNS.
As far as I can tell the phrase Catalogue bonus provision first appeared in the 2023 annual report:
“i) Catalogue bonus provision
Under the terms of the acquisition agreements for Catalogues, the Group recognises a financial liability for consideration that may be payable in line with the acquisition agreements that are dependent on the performance of the respective Catalogues. Such financial liabilities are initially recognised at fair value and subsequently carried at amortised cost. Management consider both the revenue forecasts used in the independent valuation and their expectation of revenue expected to be received within the specified performance time frame of acquiring the Catalogues when assessing the initial recognition of this financial liability. At 31 March 2023 a provision for the financial
liability of $45.0 million was recognised as a Catalogue bonus provision given the likelihood of economic outflow being triggered through respective Catalogue performance (31 March 2022: $1.3 million).” Page 133.
Prior to this the phrase used was contingent bonuses in the 2022 annual report:
“The Group have a number of contingent bonuses which are dependent on the individual catalogues meeting certain defined performance hurdles as defined in the catalogue acquisition agreement. Management’s assessment based on the underlying catalogue acquisition agreement and catalogue performance to date, is that there is a remote probability that a number of contingent bonuses will become payable. The fair value of this contingent liability is $5.8 million.” Page 149. Note the actual value in the report $939,000.
Then contingent consideration in the 2021 annual report:
“i) Contingent consideration
Under the terms of the acquisition agreements for Catalogues, contingent consideration may be payable dependent on future independent valuations of the Catalogues or revenue received within a specific time frame of acquiring the Catalogues that reach agreed upon revenue targets. At 31 March 2021 the likelihood of the aforementioned performance condition to be met was deemed remote and hence the possibility of economic outflows remote, and therefore no contingent consideration was disclosed.” Page 133.
Similar in 2020:
“h) Contingent consideration
Under the terms of the acquisition agreements for Catalogues, contingent consideration may be payable dependent on future independent valuations of the Catalogues or revenue received within a specific time frame of acquiring the Catalogues that reach agreed upon revenue targets. At 31 March 2020 the likelihood of the aforementioned performance condition to be met was deemed remote and hence the possibility of economic outflows remote, and therefore no contingent consideration was disclosed.” Page 94.